The Next Net

Imeem is Rocking

Dalton Caldwell is finally finding his groove.  His Sequoia-backed social network, Imeem, started out a couple years ago as a standalone, instant-messaging application.  He soon scrapped that in favor of a Web-based social music site.  But then, a victim of his own success, Imeem was banned from MySpace and threatened with a lawsuit from the Warner Music Group.

Caldwell, though, has turned all of that around, and made Imeem into a legitimate, ad-supported music streaming site.  He won over Warner Music, which dropped its lawsuit and licensed its entire catalog of songs to Imeem in return for a share of the advertising revenues associated with its music.  In fact, Warner Music CEO Edgar Bronfman, Jr. found the relationship with Imeem important enough to highlight in Warner Music's most recent earnings conference call.

Now, not only can you listen to songs from indie groups like The Essex Green (and embed them on your blog):

But you can also also listen to Warner Music acts like the Red Hot Chili Peppers and embed (30-second samples of) those as well:

Imeem claims 16 million unique visitors in July, 10 million registered users and more than one million unique logins a day.  Third-party measurement site Compete.com puts the number of unique visitors at 4.6 million, but shows that U.S. traffic is growing and beating both Last.fm and Bebo (see graph above).   

Comscore shows Bebo slightly ahead of Imeem in the U.S., with 4.4 million visitors in July versus 3.9 million for Imeem (and 1.8 million for Last.fm), but more notably shows an astounding 4,224 percent growth in traffic for Imeem compared to the same month last year.  (This compares to 112 percent growth for Bebo, and 59 percent growth for Last.fm).  No matter how you slice it, Imeem is rocking.

Caldwell dropped by my office earlier this week to explain his strategy.  He wants Imeem to become the first major ad-supported music streaming site, and he is working on landing deals with the other major labels to make that happen:

If you create an adversarial relationship with the labels, you are screwed.  If they want you to succeed, you will have a much easier time.

Time Warner Cable Tries to Turn Back the Clock on DVRs

  Please, just give me back that one hour... 
  Originally uploaded by SylV - like Sylvie...

Cable companies may hate TiVo, but at least they've come to accept that digital-video recorders are here to stay.  Or have they?  Time Warner Cable is introducing a DVR-like service called Look Back that lets viewers time-shift shows but doesn't let them fast-forward through the ads.  (Time Warner Cable is a sister company of my employer, Time Inc.).

From a viewing-experience point of view, Look Back is a step backwards compared to a full-throttled DVR like TiVo.  You can only watch shows from earlier the same day and you are forced to watch the ads.  The whole point of DVRs is that they allow you to watch shows when you want to watch them, which might include catching up on a  whole week's worth of The Daily Show at 3 AM on a Saturday.  Being limited to one day's worth of TV sort of defeats the purpose.

And don't underestimate the appeal of being able to skip through the ads.  It makes the TV-viewing experience both more enjoyable and more efficient (you can watch more actual TV when you strip out the ads).

So what are the folks at Time Warner Cable smoking?  They are betting that people will put up with their hobbled, networked version of a DVR because it will be free. (TiVo, in contrast, charges an extra $13 to $17 a month for its service).  It's amazing what people will put up with if they think they are getting something for free. 

But this is a stop-gap measure at best.  If the cable companies really want to counter the threat of TiVo, they are going to have to come up with a service that is better than TiVo.  Not one that is worse, but free.

Bubble Watch: Glam Media Shops Around a $200 Million Private Placement

How much froth is there in the online ad industry?  One market signal comes from a leaked private-placement document for Glam Media, which is trying to raise an eye-popping $200 million (which is very large for a private deal).  Allen & Company and Bank of America are raising the round on behalf of Glam.  According to the leaked document (thank you, TechCrunch):

Glam Media is the fastest-growing web property in the United States based
on the year over year increase in unique visitors from 782,000 to more than 19.1 million monthly unique visitors in June 2007.

Except that it's not.  Glam Media owns a collection of women oriented sites, including its flagship Glam.com.  But the bulk of those 19 million visitors comes from the ad network that it runs for other sites like MyYearbook.com, QualityHealth.com, and Kaboodle (which was recently acquired).  In other words, Glam Media is trying to tell prospective investors that because it serves up ads on a site, the visitors to those affiliated sites should count towards its own total as a "web property."

Yet, according to comScore, all of Glam Media's sites accounted for only 1.6 million of those 19 million visitors in June.  And Glam.com itself only accounted for 654,000 visitors.  Some of its lesser sites include Celebrity-Hairstyles.org.  The fact is that the bulk of Glam Media's traffic and revenues comes from its ad network, not its web properties.  Trying to sell itself as the No. 1 destination on the Web for women is misleading at best. 

Hyperbole aside, there is nothing wrong with being an ad network. In fact, they are in great demand.  But if investors cannot even trust Glam Media and its bankers to describe the business properly, how can they put any faith in the revenue and cash-flow projections set forth in the private placement?  (The numbers go from an estimated $21 million in revenues this year to $150 million next year and $392 million in 2009.  Meanwhile, cash flow (EBITDA) is shown going from a loss of $3.7 million this year to $119 million in 2009).

If this deal gets done, it will be as good a sign as any that we are now officially in Bubble 2.0 territory.

Universal Music Tests the DRM-Free Waters

  DRM Elimination Crew Suit 
  Originally uploaded by GregoryH

The future of digital-rights management (DRM) took another blow, as Universal Music tests the effects of selling its music catalog in the unrestricted MP3 format. 

The good news is that it looks like it will sell its MP3s at the regular 99-cent price per song (instead of charging more for the lower-quality MP3 format, as EMI is wrongheadedly attempting to do).  But Universal Music is playing its own games with this move by making its MP3 catalog available to every online music retailer except iTunes. 

That's just it's way of trying to shake Apple's hold on the digital music market.  Universal MP3s bought from Amazon or Rhapsody will play on your iPod, but if you buy the same songs from iTunes, they will be wrapped in Apple's DRM software.  This is doubly ironic, given Steve Jobs' public stance against DRM.  But he cannot take the DRM off of Universal's songs sold on iTunes.  Only Universal can.  And since Universal is the largest music label, by keeping iTunes out of the MP3 camp for now, it might gain some leverage at the bargaining table with Apple.

Or it might just piss off Steve Jobs, which is never a smart thing to do.

(In other Universal Music news, video-sharing site Veoh filed a preemptive lawsuit against Universal before the music giant could sue Veoh for abetting copyright infringement by its video-uploading members.  First YouTube (with Viacom), and now Veoh.  It won't be long before every major video site will be embroiled in a lawsuit with an old media company.)

Is That Your Onion in MySpace?

From a press release announcing that The Onion is partnering with MySpace (primarily to bring video to the social network):

THE ONION BRINGS JOURNALISTIC INTEGRITY, CORRECT PUNTCUATION TO MYSPACE

Respected Pillar of Journalism Partners With Fledgling Unknown “Website”

"The news business is like the tobacco business: you want to reach new readers at as young and impressionable an age as possible," Onion president Sean Mills said. "MySpace was, of course, a natural partner in that regard."

It's good to see that they take the same care in writing their press releases as they do their hard news.

Google News Now Accepting All Letters to the Editor

Google News is trying an experiment in participatory journalism.  It will begin to post comments next to its links of news articles by anyone quoted or mentioned in those articles.  Google claims that it will try to verify the identity of any such commenters (good luck), but it won't fact-check the comments before publishing them (as most newspapers and magazines do in their letters pages).

The play here for Google News is to add a layer of original content (conveniently produced by others, at no cost to Google) to the news links that make up its pages.  Google News wants to become the aggregation point for all the news that's fit to link to, and offer a platform for interesting people (i.e., the subjects of news articles and blog posts) to expand on or grouse about the stories that mention them. 

By allowing these selective comments, Google is inviting them into more of a conversation, and that's great.  Although, many times, the best comments come from people not mentioned in an article, like competitors or just smart readers. 

But what worries me more is that I'm not convinced that Google News is the best place to have those types of conversations in the first place.  That sort of feedback makes a lot more sense on the Webpage that contains the actual news article or blog post in question.  Otherwise, the comment is stripped from its context. 

Most blogs, of course, already allow comments from pretty much anybody except spammers.  Now, maybe more traditional news sites will be forced to do the same.

Social Startups Kaboodle and Clipmarks Get Snapped Up By Old Media

Old media wants some of that Web 2.0 mojo.  Hearst, the magazine company that publishes Cosmo, Esquire, and Seventeen, is buying social-shopping startup Kaboodle.  And Forbes is reportedly closing in on a deal to buy Clipmarks, a bookmarking site that lets you clip, save, and share parts of Webpages you find interesting  No official word on the purchase price for either one, but the word in the Valley is that Kaboodle sold for between $30 to $40 million.

Why are media companies buying Web software startups?  Because simply feeding people information—whether it's stock tips or style tips—is no longer enough.  If media companies want people to stick around their Websites, they need to give them something to do.  And that requires Web-based software.   Clipmarks makes it easy for people to share information with each other, while Kaboodle lets them create virtual shopping lists. 

What is not clear is whether these Web services will be better off as captive arms of big media companies than they are on their own.  For Kaboodle, the risk is that instead of becoming the general social-shopping engine of the Web (it's previous ambition), it will be seen as nothing more than a feature of the various Hearst magazine Websites.  That opens up the field for other competitors such as ThisNext (see earlier post), StyleFeeder, or Stylehive to pursue that goal.

For Clipmarks, selling might be the best move, since it doesn't seem to be gaining much ground on other social bookmark services such as del.icio.us (owned by Yahoo) or reddit (owned by Conde Nast/Wired). 

But look at what's happened to del.icio.us since Yahoo bought it.  According to Alexa, traffic has been coming down.  (See graph at right, where dwindling del.icio.us is in blue, steady reddit is in brown, and laggard Clipmarks is in red).

Update: Joshua Schachter, founder of del.icio.us, disputes Alexa's numbers in an e-mail to me:

Just wanted to note that Alexa's not a great indicator of traffic (they're showing a lot of sites down in exactly the same pattern.)

We passed 2.5m users a few months ago and are seeing huge traffic from the firefox extension, which I don't think is even counted in their metrics.

A quick check on Compete and Quantcast, shows traffic growing, especially in the past two months. As does comScore, which measures monthly unique visitors at nearly 1.5 million for July, up from 1.1 million in May.  And these don't include off-site usage, as Schachter points out.  So perhaps del.icio.us will prove to be an exception in this case.  We'll see.

IAC Ditches DoubleClick (Google) for Atlas (Microsoft)

  Atlas Cabbage 
  Originally uploaded by Protagonist

Barry Diller's InterActiveCorp (IACI) is dropping DoubleClick as a supplier of online ads for its properties like Citysearch, Evite, and Match.com.  Instead, it's going with Atlas, a division of aQuantive to serve up ads to its collective audience of 60 million people.  DoubleClick, of course, might be sold to Google (GOOG), if the deal can pass the government's scrutiny.  And aQuantive is being bought by Microsoft (MSFT). 

Losing the IAC account cannot be going over too well at Google HQ.  But with IAC also owning competing search engine Ask.com, what did they expect?  Barry Diller picked his poison, and decided he is better off helping Microsoft than Google.

ABC.com Launches HD Streaming (in Beta)

Ready to watch Ugly Betty in high-def?  Yeah, neither am I.  But if your computer screen can handle HD video (a minimum 1024 x 768 resolution is recommended), you don't need to buy an HD TV.  ABC.com is experimenting with streaming shows over the Web in HD.  You will need to download a new player from Move Networks (that won't let you fast-forward through the ads, sorry) and a broadband connection.  (Move just hired the former CTO of the Disney Internet Group, Douglas Parrish, as a senior VP).

This is a beta, though.  When I tried to install the player, nothing happened.  But it shows that media companies are thinking about bringing HD to your PC as well as your TV.  They just need to get it to actually work (caveat: the problem could very well be on my end).

If You Advertise in Second Life, Does Anyone Care?

Frank Rose has an excellent piece in this month's Wired suggesting that advertisers are wasting millions of dollars by building "pavilions" in the 3-D world that nobody visits.  Excerpt:

At least 50 major companies have ventured into the virtual world to date, spending millions in the process. IBM has created a massive complex of adjoining islands dedicated to recruitment, employee training, and in-world business meetings. Coldwell Banker has opened a virtual real estate office. Brands like Adidas, H&R Block, and Sears have set up shop. CNET and Reuters have opened virtual bureaus there. It's as if the moon suddenly had oxygen. Nobody wants to miss out.

Once you put  in several hours flailing around learning  how to function in Second Life, there isn't much to do. That may explain why more than 85 percent of the avatars created have been abandoned.

On a random day in June, the most popular location was Money Island (where Linden dollars, the official currency, are given away gratis), with a score of 136,000. Sexy Beach, one of several regions that offer virtual sex shops, dancing, and no-strings hookups, came in at 133,000. The Sears store on IBM's Innovation Island had a traffic score of 281; Coke's Virtual Thirst pavilion, a mere 27.

The Internet will eventually be full of such 3-D environments; Second Life might even be one of them. But in the meantime, it's just slurping up corporate dollars and delivering little in return.

After factoring out all the double-counting of avatars and the overwhelming presence of visitors from Europe and Asia, Rose estimates that all of Second Life at this point offers an audience of maybe 400,000 American a month to advertisers, and they never really tend to group together in any one place (partly because of the technological limitations of Second Life's architecture—each "island" is typically a single processor on a server).  Rose also makes a convincing case that ads in video games are routinely ignored because players are too engrossed in the games themselves, trying not to crash their car or avoid being fried by a laser gun, to pay any attention.

Maybe the best way to advertise in such worlds is to give people there something interesting to do, not just set up a virtual store or put up a virtual billboard that nobody cares about.  If advertising works at all in such virtual worlds, it won't be the advertisers who come up with the cool in-world destinations and activities.  (Bud.tv anyone?).   

In virtual worlds like Second Life, advertisers might be better off trying to sponsor islands or destinations that are already popular, just as they do on the Web.  And if they want to go beyond that and get consumers to engage with their products or brands in a more immersive fashion, they need to actually become part of the game-play.  That would mean somehow getting programmers or in-world designers to incorporate their brands into the virtual experiences they are creating.  I'd much rather spend time tricking out and driving a virtual BMW than clicking on a virtual billboard of the same car.  And I certainly don't want to go to BMW's pavilion.  I'd rather go to an in-world drag race where I can pick and choose from dozens of virtual cars to drive myself.